Herbert Hoover is recognized as one of the worst presidents in American history. The historical depiction of his non-handling of the Great Depression is legendary. by Kenn Jacobine
(libertarian)
Sunday, October 26, 2008
We have all been taught that he was a do-nothing executive who let the country's economy fall apart at his feet. Further, if Franklin Roosevelt had not thumped him in the presidential election of 1932 the United States would have eventually been reduced to a fifth world cesspool. This historical account taught to millions of American public school students each year cannot be farther from the truth. In fact, Hoover's activist policies during the Great Depression are the real reason he was a horrible president and it's a shame our current leaders learned nothing from his folly during the early 1930s.
The goal of Hoover's economic policies after the onset of depression was to re-inflate prices back to pre-depression levels. He sought to achieve this through two mechanisms – government spending and credit expansion. Sound familiar? First of all, he instituted a federally financed program of public works. The concept was supposed to put money in peoples' pockets so they could spend their way to recovery. By 1932, this scheme nearly doubled federal construction projects from 1929 levels. The program was very expensive by 1930s standards - $1200 per aided family. The biggest problem with federal public works, as far as Hoover was concerned, was that the program was unavailable to those hurting in remote parts of the country and to those folks unable to perform such labor. Of course, the real problem, economically speaking, with make work schemes, is that they do not work in stimulating a beaten down economy.
Instead of continuing the program, his administration increased federal relief aid to the states so they could carry out projects that would aid displaced workers. The increase in aid was phenomenal in such a short period of time. In 1929, aid to the states totaled $33 million. By 1931, the figure rose to $173 million. By 1932, aid was $308 million, which represented an astronomical amount at the time.
Then there was Hoover's Reconstruction Finance Corporation (RFC) which was approved by Congress in 1932. In that year, the RFC made $2.3 billion in loans to banks, railroads, and farmers. Most of the money went to paying off debts, supposedly to ensure the solvency of the credit markets. Still more money flowed from the RFC to the states to further finance make work schemes. In addition, $25 million was allocated to the Treasury Department so it could invest in the stock of the 12 newly created Federal Home Loan Banks.It was the Federal Home Loan Bank Act (FHLBA) which showed the enormous interest Hoover had in interfering in the market in a way that no previous administration ever had. He wanted ultimately to build a huge mortgage discount banking system that included all financial institutions in America. He wanted mortgages to be discounted by these institutions up to 80 percent of the value. Thwarted in his efforts, he settled for a system that forced building and loan associations to discount mortgages to 50 percent of value. So, contrary to popular belief, Herbert Hoover, for his time period, was a radical government spender and interventionist in the economy. Indeed, this article has only represented a few of the more egregious measures of his administration. Without question, Roosevelt's New Deal was much larger and more comprehensive a program. But, what is important to understand is that both Hoover and Roosevelt's policies are what put the "Great" in Great Depression by prolonging the recovery by about 15 years. The increased government spending of the time, like this year's stimulus package, did nothing to spur recovery. The expansion of credit through the RFC and FHLBA was as effective as current Fed and Administration policies will be in restoring faith in the banks and getting the economy moving again. Tighten your belts, because If Bush is our Hoover and Obama is going to be our Roosevelt, then we are in for many years of economic despair.
Kenn Jacobine teaches History, English, and Information Technology in a Global Society for the American International School of Lusaka, Zambia. Visit his website at: The View from Abroad.
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Trying to say that Hoover's efforts to reinvigorate a dangerously suffering economy is like a hungry man saying that the pancakes are overcooked. You are not only criticizing efforts that SAVED this country by giving work to people who had none, but you're jumbling many implications to make it sound disasterous.
To say, for instance, that: In 1929, aid to the states totaled $33 million. By 1931, the figure rose to $173 million. By 1932, aid was $308 million, which represented an astronomical amount at the time. is to make it sound catastrophic when that's EXACTLY what they HAD to do! If Hoover and the Congress had not injected large amounts of money into the economy, where was it going to come from?
The simplicity of your argument makes me wonder what your alternative was? You make it sound as if all the spending was the WRONG choice, what is it that you would have recommended?
Your accusation that Hoover and FDR prolonged the depression and even amplified it has no historical creedence at all. The public works programs and government relief acts more than any other single act SAVED the economy from a much more dangerous outcome that would have ensued.
It is very commonly understood that the Fed TIGHTENING monetary policy, instead of loosening it, was one of the biggest contributors to the hardship that people faced. Rather than bailing people out, the Fed and the banks took the lifeboats and ROWED AWAY. And, the meltdown of the stock market, with NO public assistance programs in place AT ALL, left people who lost their life's savings to struggle on their own.
That's one of the important strategies THIS TIME to our credit dilemma. The Fed and Treasury are pouring money into the economy like gravy on a hot turkey sandwich! Your heartless Libertarian heartstrings just don't want to offer a helping hand to ANYONE. You're so afraid that someone might be taking advantage of "the system" that you turn your back on EVERYONE ~ except yourselves.
I think, rather than TEACHING history, you ought to try LEARNING it first.
The Hoover/Roosevelt Depression was the deepest in U.S. history and longer by 30% than any previous recessions/depressions. The reason was because those previous downturns had virtually no government intervention whereas the Hoover/Roosevelt Depression has been well documented for its interventionism.
As far as being heartless, yes, I don't want to take money from hardworking Americans to give to the fat cats on Wall Street or the inefficient car companies or foreign banks. Guilty as charged.
We will never have true prosperity in this country, that all Americans can share, until we have a significant debate on sound monetary policy. I am dumbfounded that liberals have not been the first ones to call for a reevaluation of the Fed and its policies.
Well, excuuuuuuse me if I think you just made my point. I thought the point of your article was to criticize Hoover's intercession. I guess now you're admitting that it wasn't.
There is no way of comparing any recessions PRIOR to the 29-33 depression because there wasn't even much of a country, let alone data that would encompass such a large concept. Even the data we have from the 20's and 30's was collected from historical records. There wasn't a talented team of statisticians logging the whole event.
It is well-recognized that the Public Works programs and the social assistance programs of the Hoover-FDR efforts were responsible for the RECOVERY not the OCCURENCE of the depressed conditions. Your understanding of economic history needs some refreshing while your diagnosis of causes is abysmal.
I love those lines that conservatives and Libertarians use when they're brushing off criticisms of their selfishness. I don't like to line the pockets of the fat cats, et. al. But, what you're really saying is that you DON'T WANT TO PAY TAXES AT ALL, and that anyone who is struggling to find a job or keep a job should just pull themselves up by the bootstraps. Ha! Ha! Always the wolf in sheep's clothing!
